PHUMELELA’S REVENUE DIVERSIFICATION BEARS FRUIT

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Phumelela: Phumelela Gaming and Leisure Limited (“Phumelela”) today announced results for the year ended July 2017 reflecting continued solid growth from international operations and a pleasing performance from the fixed odds business and investments in Supabets and Interbet.

Phumelela Gaming and Leisure Limited (“Phumelela”) today announced results for the year ended July 2017 reflecting continued solid growth from international operations and a pleasing performance from the fixed odds business and investments in Supabets and Interbet. Earnings per share increased 3% to 168,46 cents per share with headline earnings per share in constant currency up 30% to 214,34 cents per share.

A marginal decrease in local income to R1.21 billion (2016: R1.22 billion) was offset by the 12% increase in international income to R307,5 million resulting in total income of R1.5 billion. The operating loss of R44,5 million in local operations was equally offset by an international operating profit of R93,5 million translating into total operating profit before equity accounted profits increasing 14% to R49,0 million.

CEO Rian du Plessis explains: “These results reflect the positive impact of our diversification strategy which has seen us internationalise the business, acquire strategic local investments as well as introduce new betting products.” International operations accounted for 120% of group pre-tax profit and grew strongly in constant currency. Du Plessis explains that the diversification strategy is paying dividends with group attributable profit up 113% over the past five years and earnings up 85%. “This equates to compound growth over five years of 16% for attributable profit and 13% for earnings per share.”

The acquisition of a 50% stake in sports betting and gaming group Supabets and an increase in the Interbet stake to 50% became effective on 1 March 2017. “We have seen excellent synergistic benefits from these investments and they are making a healthy contribution to group operations.” Shareholder support for the Supabets rights offer was pleasing, indicating endorsement of the earnings enhancement investment objective.

While the traditional Tote operations performed under par, horseracing remains an integral part of the product offering and is inseparable from the success of the international operations. “We remain committed to South African horseracing and have implemented a plan to modernise and reposition our traditional business,” says du Plessis. This has included streamlining the senior management structure and appointing a national retail manager to address technology, store design and customer experience. “We are particularly looking at how we can apply technology more effectively and are continually developing new smartphone betting applications.” Free Wi-Fi is also being offered in all stores.

Looking ahead du Plessis cautions that South African trading conditions will remain challenging. “We will continue to proactively manage these challenges by continuing our modernisation and repositioning programme, which includes strict cost saving initiatives, as well as identifying new opportunities.” The group has made offers of early retirement and voluntary retrenchment to all staff at a cost of R30 million. Eight under-performing fixed odds outlets have been identified for joint ventures with Supabets and further joint ventures will be considered. In addition, Supabets is set to re-introduce betting on racing and the Tabonline website will be replaced with a new website using Interbet’s premium technology. “We expect our international operations to have another good year and are targeting growth in normalised earnings per share.”

The group declared a final gross cash dividend of 70,00 cents per share.

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